2023 (12) TMI 247 - AT - Central Excise

Valuation - inclusion of excess freight collected from the dealers in the assessable value - HELD THAT - In the present case, it is undisputed fact that the place of removal of excisable goods is a factory gate of the appellant. It is also found that in the case of ex-factory sale, the freight amount collected is not includible in the assessable value of the excisable goods. This issue is no more res-integra that the excess freight collected by the appellant from the buyer is merely a profit and no excise duty can be levied on such profit as held in the various decisions - the appellant has sold the vehicles to the dealers at the ex-factory price and the title is transferred to the buyer at the factory gate and the appellant made arrangement for the transportation of vehicles on the request of the dealers. Since, the title in the vehicles is transferred at the factory gate, all the risk of damage during the transportation is that of the dealer and therefore, the assessable value is the transaction value in terms of Section 4(1)(a) of the Act and the provisions of Section 4(1)(b) and Valuation Rules are not applicable. This issue has recently been considered by the coordinate bench of the Ahmedabad in the case of KASHYAP SWEETNERS LIMITED VERSUS COMMISSIONER OF CENTRAL EXCISE ST, VAPI AND JITENDRA PANDEY VERSUS COMMISSIONER OF CENTRAL EXCISE ST, VAPI 2023 (7) TMI 1111 - CESTAT AHMEDABAD , wherein the Tribunal has held excess amount of freight from the customer is profit on account of transportation and not part and parcel of the value of the goods therefore, same cannot be included in the assessable value. The impugned orders are not sustainable in law - Appeal allowed.

Summary

Issues Involved:
1. Whether the excess freight collected is liable to be included in the assessable value.
2. Applicability of extended period of limitation.
3. Demand of interest and imposition of penalty.

Summary:

Issue 1: Inclusion of Excess Freight in Assessable Value
The appellant, engaged in the manufacture and sale of motorcycles and scooters, was alleged to have excluded excess freight collected from dealers in the assessable value of goods. The department contended that this excess freight should form part of the assessable value under Rule 5 and 6 of Central Excise Valuation Rules, 2000. The appellant argued that the sale was ex-factory, and the title transferred at the factory gate, making the excess freight merely a profit not connected to the manufacturing activity. The Tribunal found that the sale was indeed ex-factory and that the excess freight collected was a profit on transportation, not includible in the assessable value. This was supported by several judicial precedents, including decisions in Mercedes Benz India Pvt. Ltd., Baroda Electric Meters Ltd., and Kashyap Sweetners Limited.

Issue 2: Extended Period of Limitation
The appellant challenged the invocation of the extended period of limitation, arguing that the issue involved interpretation of law and legal provisions, with no suppression of facts. The Tribunal noted that the facts were within the department's knowledge, and there was no suppression by the appellant, thus the extended period of limitation was not applicable.

Issue 3: Demand of Interest and Penalty
The Tribunal held that the demand of interest is sustainable only if the demand of tax is confirmed. Since the demand of tax itself was set aside, the interest demand was also not sustainable. Regarding the penalty, the Tribunal found that the appellant acted under a bona fide belief that no excise duty was payable on the excess freight collected, and there was no mens rea. Therefore, the imposition of penalty was not justified.

Conclusion:
The Tribunal set aside the impugned orders, allowing the appeals with consequential relief, if any, as per law. The decision emphasized that the excess freight collected was a profit on transportation and not part of the assessable value of the excisable goods.